86 comments

I think that the question of how ethical or unethical Caramadre’s loophole was really depends on whether all of the terminally ill individuals completely understood and fully acknowledged what they were signing. As long as that was the case, then I find nothing wrong with what he did. I would even say that he did many good by providing them with extra money, giving them something for nothing. But if it is found that he did mislead people, or if he forged their signatures on documents, then he definitely did do something unethical.

On the topic of whether or not it is ethical to profit from death, I believe that it is, in this case, all right. Was anyone hurt by Caramadre’s scheme? No. The families were hurt by their loved ones dying, nut their signatures on an annuity document. And as others on this discussion board have pointed out, there are many businesses benefiting from death that no one finds ethically wrong.

The bottom line is, I don’t think that anyone is able to issue a statement such as “profiting from death is always wrong” or “profiting from death is always okay”. We must decide on a case-to-case basis, and in the case of Caramadre’s loophole, i do not believe that he did anything ethically wrong.

GLORIA WOLK

Aug. 27, 2012, 9:02 p.m.

Phyllis—cheers! Right with every single statement.

To add, the Government Accounting Office published the results of an investigation into the DOJ and its failure to prosecute anyone on Wall Street due, in part, to so many of their associates being in the DOJ.

Glenn Greenwald’s “With Liberty and Justice for Some,” again; how it all began with the Nixon pardon, a two-tier system of justice. No law governs the elites. And it just gets worse with each administration.

Simon Gatt

Aug. 28, 2012, 12:52 a.m.

I agree fully with Audrey’s comment above. It may be distasteful for someone to profit so nakedly from a person’s death, even though we accept that lots of people do so less obviously. But in this case, there is nothing essentially unethical about what Mr Caramadre was doing.
If I understood the situation correctly, the people he got to sign on the policies were for the most part not in a position to buy insurance for themselves; equally, I would imagine that their families would not be able to either. Thus what Mr Caramadre was doing was providing a little extra income - probably welcome income, and income that would not have been forthcoming from anywhere else - to people at a difficult stage of their lives.
That he made a profit out of it is neither here nor there. He did not cheat anyone out of anything, not even the insurance companies. They after all can be presumed to understand their own contracts and structures. He did not cheat the families: they had no expectations anyway. He did not cheat the people he insured, though you may feel he should have paid them more than USD2000. That, though, is a matter of degree not of the concept in itself.
The concept of “insurable interest” is there in most life products to avoid a possibly perverse incentive to kill someone you’ve insured. As long as Mr Caramadre’s not going out and hastening his signees’ deaths, it’s hard to find an ethical objection to what he’s doing. Objections as to appropriateness and conformity with our cultural norms, however, are a different matter.

Excommunicated_Road Kill

Aug. 28, 2012, 2:58 a.m.

You can virtually be certain that there are people whom will profit themselves, from others whom they have manipulated as more valuable dead than alive. Ask a simple question, Is this without fear and favor?

Kristen

Aug. 28, 2012, 5:59 a.m.

The individuals being used as annuitors were paid for their signatures. This scheme put money in the hands of the elderly, the sick, the dieing. Money that they could use for that expensive and unessesary casket or money to provide comfort and enjoyment in their last moments on earth.

This is a situation where individuals benefit too much and make the corporations unhappy. Boo hoo for them. The insurance companies who wrote that policy made some lapses in self-protection and they got taken. Good for Caramadre! This is true capatilism. He used his brains to create valuable services that benefited all invovled. The insurance company plays this game everyday they just lose poorly.

I would much rather have some one approach my relative or myself with this offer than approach about purchasing a casket with a cadilac price tag or the BS about how many flowers “truely shows your love.”

Kressel

Aug. 28, 2012, 10:11 a.m.

The only way I can see this as ethical is if the insured understands exactly what is going on and gets to name at least some of the beneficiaries. I understand the “investor” has to make money, but if he’s the only beneficiary, then it’s completely unethical.

Donald First

Aug. 28, 2012, 10:22 a.m.

While we are discussing Insurable Interest here, other than Group Life Insurance. It is necessary for an Insurable interest to exist when the policy is written, not at the time of death! So arguably he could have written a plan, with a legit Beneficiary,and paid to change it after the policy was issued.

Laurel

Aug. 28, 2012, 10:42 a.m.

@ Kressel

Why is it only ethical if the person signing gets to name the beneficiary?

The “measure of life” is only an insurance that the investor will not go below what they originally invested in whatever market they chose, so all the annuitor guarantees is that the investor won’t LOSE money on their investment - which is something very attractive to the investor, but not a guarantee that they will MAKE money, they must have made money, but they also would have broken even sometimes which means on that particular transaction if they invested $10,000 and gave the signer $2,000 for the first meeting, then say $5,000 to sign the papers, and then the stock the principal was used on went down to $8,000, the annuitor was a guarantee that the insurance company would return the investor $10,000 (even though the stock was worth $8,000) - on break even transactions Mr Caramadre et al would LOSE $7,000 on that transaction.

In the cases of these annunitors, that money would have eased the end of their lives, they now had some money, as one of the people on the TAL podcast told the story, to do things like not borrow from their kids, and to do things that let them do things like get their hair done or to buy presents for their grandchildren’s birthdays before they died.

The way you present it, you would want Mr Caramadre to give the signer some money, then also give them additional money on an investment that they had put no capital into? That’s like a stranger walking up to you on the street and saying “hey, here’s $10, and if you walk with me to the corner store, I’ll buy a lottery ticket and if I win you can have half!” - it doesn’t make sense.

HENRY A. TURNER, ATTORNEY AT LAW

Aug. 28, 2012, 11:23 a.m.

As MAD magazine correctly stated many years ago i.e. Think about for a minute what Life Insurance really is. You’re betting that you’ll die and the Insurance Company is betting that you’ll live.

Ryan S

Aug. 28, 2012, 12:55 p.m.

It seems like the majority of those who disagree with Caramadre’s actions do so simply because they deplore the idea. Those on the opposite side justify their sentiment by pointing out that taking advantage of loopholes in contracts created by insurance companies is not wrong in itself. Little resolution can come out such arguments as each side is starting from a different set of premises.

To the question- Caramadre’s comments toward the end of the TAL broadcast seem reasonable (pending innocence in the case of the fraud charges). Cultural examples of profiting from death (or the fear of it) exist everywhere. How many news channels reported on Terri Schiavo? How many advertisers paid handsomely for airtime during those broadcasts? How much did they make in return for their sponsorship of the story?

I would say my first condition, that the insured knows what he’s getting into, is the more important condition. But as to the second, the whole point of life insurance policies is that they benefit the bereaved family. The first time I ever heard of such an arrangement was when I was working for an estate planning attorney. One of our clients had an investor who paid her premiums and both the investor and the client’s daughter were named as beneficiaries. That was this woman’s way of taking care of her daughter. And you see, in the first deposition, the man was grateful for the benefit to his wife, which I assume is for more than the initial cash payment. (There wasn’t one in the case in my office.) In contrast, the second man was furious because his wife was NOT named a beneficiary.

Laurel

Aug. 28, 2012, 4:20 p.m.

@ Kessel,

I don’t disagree that the insured should know what they’re getting into, except in this case, the insured was the investor who paid the capital and then directed which markets to invest the monies into. The person who signed as an annuitor is only a ‘measure of life’ - meaning their death will trigger the end of the contract, however far + or - the investment has gone since it was opened.

Have you listened to the TAL story? They speak about the second man (and also have Mr. Caramadre’s response to it) and from listening to how the FBI agents are phrasing their questions, I personally believe they are leading questions, designed to push their part of the story that this aweful man was making millions off the death of their loved one, rather than a person figured out a loophole in a system the insurance industry designed and did not care to fix or look into until the markets started to crash and began to cost them money.

I think this also is displayed in comments like Ms. Porter who said: “I lose my mom, who is my best friend, my world, and in me, losing my mother forever at the age of 64, you, in turn, profit and get X amount of dollars,” says Stephanie Porter, whose mother received $2,000 from Caramadre before she died of cancer.

Later on in the article it’s explained that Mrs. Howard (Ms. Porter’s mother) was given $2000 for the initial meeting, and it was explained that she could possibly receive more money for signing some documents.

Sadly, Mrs. Howard passed away shortly after that, and wasn’t able to fully enter the program.

However, knowing how people usually behave, if Mrs. Howard had been able to legibly sign and received additional money, and then survived long enough to have enjoyed the use of them (whether for estate planning or for living benefits or health payments), then would Ms. Porter have been so upset? I’m not so sure.

Also - what was stopping all these people who were given money from Mr. Caramadre from turning around and signing their very own life insurance - in fact they could have gone right in to the insurance company Mr. Caramadre had them signing as a measure of life and become an investory in that life insurance variable policy as well.

Kressel

Aug. 29, 2012, 6:58 a.m.

In thinking how I indelicately phrased my post yesterday, ie that the point of life insurance is to benefit the family members of the deceased, I think I’ve hit on the crux of the moral problem. The point of life insurance is not for anyone to benefit from another’s death but for family members to be provided for in the case of a loss of a breadwinner. If a middle-aged person buys a policy and doesn’t die until after he’s retired and his kids are self-supporting, then the death benefit is a recovery of all the premiums paid over his lifetime. But the insured person, ie the one whose death triggers the benefit, wouldn’t normally be expected to provide for a stranger. If the stranger chooses to pay for life insurance for him and gets a benefit, he may be making back money on his investment, but it’s still profiting from someone’s death. If he includes the family members as beneficiaries, then he is at least using life insurance for what it’s meant for - to provide for the bereaved family. Anything else is just pure senseless profit.

Forrest MacGregor

Aug. 29, 2012, 8:12 p.m.

If the gent interprets the contracts and laws properly, does his work correctly and legally, and profits because of the incompetence of both the industry/companies and regulators, what’s wrong with it?

Strictly speaking, I may have ethical issues with folks getting taken advantage of, but that doesn’t extend to incompetent companies striving to criminalize the legal actions of people who are following rules they set. The spirit and letter of the law are often cleaved, and it’s up to the regulators to close the holes, if they can.

If they can’t, then the companies can always stop selling these products and the problem goes away. Sorry, but that is the system you invented, Insurance Companies and Rhode Island. Live with it or fix it.

Mike

Aug. 29, 2012, 8:26 p.m.

Sorry, I can’t read all these comments: Has anyone drawn the obvious comparison to the credit default swap? Read Michael Lewis’ The Big Short, he explains it better than most. A credit default swap is when you buy an insurance policy on a company, say General Electric. You might do this if, say, you own a bunch of GE stock. If GE goes bust, the CDS will cover your losses. Since GE is unlikely to go bankrupt, the companies underwriting these policies are happy to collect your premiums for a benefit they’ll presumably never have to pay out. And they were just as happy to collect the premiums on the “AAA-rated” mortgage backed security bonds. They figured the guys buying those must be crazy. Some of those guys got very, very rich when the real estate market crashed because they knew the same thing Caramadre knew - those bonds were going to die. Ethical?

Ed C

Aug. 29, 2012, 9:30 p.m.

A couple points: first this loophole is anarbitrage. The proverbial free lunch where the investor is taking a risk less bet. When viewed through the cold lens of capitalism and free markets, Caramadre is doing the market a favor by making it more efficient.

A second point: I’m surprised at the general sentiment (not everyone, though, to be sure) that the only real financial victim is the insurance companies. Their losses will likely result in higher premiums across the board. For all I know I may actually be financing this whole affair through my premiums or a mutual fund in my retirement account.

Finally, previous comments about “what kind of world do we want to live in” resonates with me. Yeah, in an ideal world you shouldn’t need to hedge your risk of untimely demise with an insurance product because you know that your fellow brethren will all chip in and pick up the slack to send your kids to college and keep your family under the same roof. But this strikes me as a yearning for a utopia that human nature precludes. I’m reminded of Churchill’s comment about democracy: that it’s the worst form of government, except for all the others.

dan

Aug. 30, 2012, 1:53 a.m.

It was a legal insurance scheme. So it doesn’t matter my personal opinion. ....

But my opinion anyway ... Insurance should be not allowed for anyone without a vested interest insured commodity. So this insurance death scheme should not be allowed.

Similarly, you should not be able purchase credit default swaps on property you do not have an interest in. This would greatly minimize the wild swings and over-corrections in many of the markets.

Steve

Aug. 30, 2012, 2:14 p.m.

What is amazing to me about these comments is that everyone seems to be either ignoring assuming that the allegations that Caramadre lied and deceived the terminally ill, as well as the companies, are not true. Perhaps that has to do with the editorial structure of the story, which seems to take Caramadre’s explanation for everything at face value as if it were gospel. Stephanie Porter’s mother’s signature was forged by accident? Really? How does that happen? In my view, if you lie to people on their deathbed, you are lower than pond scum, even if you don’t steal their money.

Paula

Aug. 30, 2012, 3:49 p.m.

I don’t think this is ethical, but probably for an entirely different reason than you might think. I think this is problematic for the same reason that John Paulson’s mortage-backed securities loophole was unethical. Ultimately, it isn’t the insurance company that is going to take the hit. Its all the other innocent parties who rely on the system being “fair” and transparent who will pay the price. In other words, the cost of life insurance will go up for me and everyone else who wants to provide protection for their family in the event of unexpected and untimely death. Just like the availability of home mortages shrank due to the mortgage crisis.

Kudos to Caramadre and Paulson respectively for finding the loopholes, but the benefit to them for taking advantage of it was disproporationate to the skill and effort involved in finding it. Perhaps we should have a system that would reward people for finding and fixing loopholes rather than taking advantage of them.

Donald First

Aug. 30, 2012, 4:36 p.m.

It’s kind of Comical to a certain degree, that the reason this loophole came about is the state did not have a law requiring it. Ha RI required it loophole? Insurable interest is Basic insurance, why would you not want it in there. He submitted 5 claims on the same test with the same death certificate. That’s got kickme written all over it.

Patricia T

Aug. 30, 2012, 7:27 p.m.

The question posed was “is it ETHICAL,” not is it LEGAL. While it seems legal to me, I do not think it was ethical. Nor do I think the way in which many insurance companies, financial companies, banks, etc do business is ethical. There is a big difference between ethics and law.

Pat Benson

Aug. 31, 2012, 5:26 a.m.

If you want to go after a huge corporate industry that profits daily from the impending death of people and sets themselves out to be “helpful” at the end of a person’s life, look into the practices of Vitas and the other giant “hospice” companies. They legally bilk the Medicare system out of millions of dollars to make a profit on the last days of life when the greiving family isn’t paying attention to all the expensive and unnecessary equipment and supplies that show up within moments…yes moments of the signed hospice contract. The average stay in hospice is just 6 days, so they go out of their way to load on every possible charge as fast as possible. And who aids in ths practice? The nursing home industry. Together they work to profit from every last dime available at the end of life, supporting each other’s efforts to get the bigs bucks at the end. Oh…and should the hospice patient take their sweet time in dying and actually require the care giving services promised by the hospice contract? Good luck getting them. They are under staffed, disorganized, and good at only one task…signing up new patients and billing medicare…I watched and documented the conspiracy between my mother’s elderly care residence and two hospice companies. It was alarming and obvious there was collusion taking place…and it’s going on daily, but nobody losing a loved one wants to speak out about it…

Joe

Sep. 1, 2012, 10:58 a.m.

I am glad that the insurance companies got EXACTLY what they wrote into their contracts. Instead of bringing charges, awards for innovation should be passed out.

Larry Barkan

Sep. 1, 2012, 11:31 a.m.

Joseph Caramadre is right: Death is big business. Many companies and individuals profit from it. I was delighted that he “stuck it” to the insurance companies whose job it is to profit by denying claims. That’s basically the business they are in regardless of how they try and conceal that fact. I was also happy to hear Caramadre delight in sticking it to those hot shot lawyers from Harvard, etc. who work to help the insurance companies deny claims. The insurance companies wrote the plans that made Caramadre’s “business” possible and then complain when someone forces them to live up to the plans they created. Generally, I’m on the opposite side of people like him who work for rich people. In this case…way to go, Joe.

Susan M. Bergmann

Sep. 1, 2012, 2 p.m.

Just heard TAL. I think it was a brilliant scheme. The only problem was that he got too greedy, did it too much. Killed the goose that laid the golden egg.

I do not think it was unethical. Glad someone found a way to stick it to the insurance companies.

We are squeamish about death; that is different from whether or not what was done was wrong.

Muriel

Sep. 1, 2012, 2:04 p.m.

I don’t think it was unethical, illegal or wrong. I don’t think he did anything wrong to the people that gave their signature for 2,000. If someone came to me, and said they wanted to buy my signature for 2k and wanted nothing in return and it wouldn’t damage my reputation, they could have it. Whether I was dying or not. They aren’t profiting from my death, they are just getting their contract with the insurance company fulfilled earlier than was expected by the insurance company. Frankly I admire the guy.

Bill Uebbing

Sep. 1, 2012, 5:54 p.m.

It was ethical only if Caramadre’s annuitants understood what Caramadre was getting out of it. Each annuity involved a partnership between Caramadre and his annuitant. He had a fiduciary duty to each partner to disclose what he was getting out of it so the annuitant would have a chance to ask for a fairer distribution of the gains. Meinhard v. Salmon is the classic case. The annuitants, or their estates, should be able to sue Caramadre civilly.

However, the insurance companies have no valid case, civil or criminal, against Caramadre. “Let the seller beware!” Nor were the annuitants criminally defrauded since they lost nothing by the deal, having invested nothing.

Katherine Simpson

Sep. 2, 2012, 10:55 a.m.

Last night I watched “Inside Job”, and this morning listened to “Loophole” on This American Life. Who are they kidding? (And by “they” I mean the financial services industry and their representatives in our government.) The only reason they’re going after Caramadre is that he dared to encroach on their club. He got the better of all the Harvard grads. And while Wall Street traders were spending their millions on prostitutes and cocaine, Caramadre was giving $2000 checks to people who were, by definition, terminally ill before he ever met them. I think Caramadre was self-serving, like almost everyone else in this country. But it seems to me he followed the law at least as diligently as Wall Street, profited far less and was seemingly twice as honest. And his actions don’t cause me any more discomfort than the florist who charged me $50 for a wad of “Baby’s Breath” for my wedding. I wish it wasn’t the case, but the outrage over anything Caramadre has done seems incredibly ironic, to say the least.

Katherine Simpson

Sep. 2, 2012, 11:03 a.m.

ProPublica & This American Life: what I would love to know is, who are the people driving the investigation into Caramadre, and what are their relationships to the financial services industry? Is there a trail between elected officials and campaign contributions? I would be very surprised if there wasn’t.

Gman

Sep. 2, 2012, 6:05 p.m.

AEG, the company that was promoting Michael Jackson’s last tour grossed $260 million on the documentary that they produced followed his untimely death. That was more than the earnings promised to MJ from the tour. Emails show that company execs knew MJ’s troubled state of mind but, unwilling to lose their investment, continued to push the tour forward, regardless of warning signs about his mental state. I guess they made a few bucks from his death - where is the handwringing over that?

Dave A.

Sep. 4, 2012, 5:51 p.m.

I have a different beef with Mr. Caramadre: Every dime he pulled out of the insurance companies ended up getting paid for by you and me in the form of higher premiums, or by the lower-level insurance company employees in the form of lower compensation. All so he could line his friends’ pockets with money they didn’t earn.

“Creations”, my foot. He’s not creating anything; rather, he’s finding ways to profit from companies who didn’t slather their every moves with legal fine print. Did he feel smug after filling his house with office furniture he didn’t need? Mr. Caramadre reminds me of that kid on the playground you played a game or made a bet with, who then claimed to have won the bet by pointing out some rule you didn’t specify narrowly enough. What a jerk.

Laurel

Sep. 5, 2012, 8:35 a.m.

@ Dave A

I don’t disagree that whatever Mr Caramadre made off the insurance companies the general public ended up ‘paying’ for.

However, I would argue that the insurance companies came up with this product (and many products) to do the exact same thing… getting the public to pay for a service and make a profit, except in Mr Caramadre’s case the annuitors got a profit and the insurance company only cared that something might be going awry when their profits were less than they had estimated due to other market conditions - the fact that they didn’t notice it for so many years makes me doubt their crying foul - if it was really hurting them/the public/whatever, they would’ve said something long ago.

Laura

Sep. 11, 2012, 8:30 a.m.

So, I just listened to the TAL show last night, and here’s what I walked away with.

- Was it moral/ ethical? If the dying insured knew what they were signing, I don’t suppose I have any ethical issues with it. In a perfect society perhaps we wouldn’t be faced with the question of profiting from another’s death, but in reality it’s part of the picture, part of how it all works. At least in these cases, the dying saw benefit while they were alive.

- I didn’t hear anything in the TAL story to indicate it was illegal, though. Having served on a federal grand jury, I know that sometimes all you have are assurances from the prosecuting agencies that they conducted all of their evidence gathering above-board. Most of the time they are completely and obviously professional, but now and again you have only your trust in the testifying agent to rely on. In this case, I wonder if they weren’t leading their witnesses to a large degree.

Jeremy Shields

Sep. 11, 2012, 8:52 a.m.

Growing up in a funeral home, I saw firsthand how death affects people and how my dad brought them peace at a very difficult time. It always hurt me when I would hear people say, “those morticians are crooked for taking advantage of people when they are at their most vulnerable.” What those same people didn’t see was what my dad had to do, when he had to do it, and how hard he worked for 44 long years. Do the want the call at 3:00 in the morning to go pick someone up who had been decapitated by a semi-truck in a head-on collision? Do they want to go to the second floor apartment of a 460 lbs man that had been dead in the desert heat for eight days? Do they want to go to the hospital and remove a child that had died of cancer? And yet in every instance, difficult or not, my dad deliverd the same professional service and a caring, compassionate attitude to try, in his own way, to assuage the family’s bereavement. Like Mr. Caramadre, many, many people that paid my dad handsome money to take care of their loved one, would take out newspaper ads to publicly thank him for the way he helped them through this process. Unlike Mr. Caramadre, he was selling them something, not giving them money. However, like Mr. Caramadre, my dad, through death, gave not only the deceased his professional care, but more importantly the families a lasting memory of their mothers, fathers, children, grandparents, etc. We are so weird about death as Americans and have this unwarranted aversion to anything that ties money to it. It is one half of the old cliche of death and taxes, yet we can’t get out of our own way to see the other side. I loved the story on TAL and hope that Mr. Caramadre is successful in beating these suits and charges brought against him, and the we as a society can start to see the process of death, dying, and what comes after here on earth in more realistic terms.

Sarah

Sep. 17, 2012, 9:42 p.m.

Pro Publica - you should consider interviewing Harvard Professor Michael Sandel as part of a follow-up to this story. He has a great deal to say on this topic in his latest book, What Money Can’t Buy: The Moral Limits of Markets.